Tuesday, September 02, 2008
The expected cut in the Reserve Bank’s cash rate of 0.25 percentage points will be the first in seven years.
In another first the Bank will announce the move during the middle of the Parliament’s question time – at 2.30pm.
Minutes later two of the big banks, the National Australia and the ANZ are expected to apply the cut to their standard variable mortgage rates. They have already undertaken to do so.
The move would cut the ANZ’s standard rate from 9.67% to 9.42% and the National Australia’s standard rate from 9.61% to 9.36%...
A third, the Commonwealth Bank, has promised to “do our best to pass on as much as we can to our customers”.
On Sunday the non-bank lender Wizard got in early cutting its standard variable mortgage rate by 0.25 percentage points to 9.29% ahead of the Reserve Bank move.
The 0.25 percentage point cut expected from the Reserve would cut the repayment on a $250,000 mortgage by around $43 per month if fully passed on.
The Treasurer Wayne Swan yesterday stepped up pressure on all of the banks to pass it all on saying that if the banks didn’t they would be “challenging the authority of the Reserve Bank and the authority of the Governor, and that’s a challenge to the authority of monetary policy.”
He had directed the Treasury to “have a good look at all competitive aspects of the market”.
The Opposition Leader Brendan Nelson called on the Reserve Bank to cut by twice the expected 0.25 percentage points saying there was “every justification for rates to be cut by half a percentage point”.
But when asked whether he would provide advice to the Bank in the same terms if he became the Prime Minister he said he would not.
“I am the Leader of the Opposition, and in that sense, somebody has to stand up for Australians, for Australian workers, Australian businesses,” he said.
In Parliament the Prime Minister Kevin Rudd savaged him for introducing a “new Nelson doctrine - what I say in opposition has nothing whatsoever to do with what I do in government”.
“How can the Leader of the Opposition stand credibly in the parliament when he goes out and says that the Reserve Bank should take a particular course of action and, in the same breath, say that if he were Prime Minister he would not say that or do that?”
The Reserve Bank board will make its decision this morning after receiving a briefing from Bank staff about the state of the Australian and international economies.
The minutes of its previous meeting concluded that “less restrictive conditions could soon be called for,” warning that “otherwise the risk of a deeper and more persistent slowing in the economy would increase”.
Under new procedures introduced after the November election the board’s move will be announced at 2.30pm, which for the first time will be in the middle of the Parliament’s question time.